State of the Raiders’ Cap: Breaking Down The Numbers

Last week I was invited to join the gents from the Pillaging Just For Fun podcast and we spent an hour discussing the Oakland Raiders’ cap situation. At least we did when I was not going full Grand Theft Auto in the streets of humble Modesto, California. You really should listen to it was a great bit.

I am taking a one-week hiatus from The Vegas Archives in order to put to “paper” the ideas we discussed on that podcast. This article will be broken into four parts:

Basic cap terminology and concepts of note

What the Raiders can do and who they could target

The Rory Approach to both free agency and the draft

Reggie’s Approach: my predictions for free agency and the draft.

As usual, we will jump right into it.

Cap Concepts

Since joining the Raiders organization, Reggie McKenzie has used simplistic contract structures in order to acquire his targeted players. Primarily, the Raiders would sign a player and give him a contract with high base salaries, minimal signing bonuses, and high year one cap numbers. This was done with the intent of meeting the 85% spending threshold over four years that all teams must achieve. By guaranteeing years of the contract and giving large roster bonuses upfront to pair with large base salaries, Reggie avoided reverse cap doom.

Now that the Raiders have hit picks in the draft and added long-term talent, they do not have the luxury of absurd quantities of cap space. It is a good problem to have. Because of that, the Raiders will have to switch from guaranteeing years to guaranteeing bonuses, while also giving out signing bonuses instead of roster bonuses.

Base salary: This is the basic salary a player will earn through his 17 weekly game checks. It is the first and most important number when looking at cap hits.

Cap hit: The total accounted payout for the player (base+bonus payments+incentives)

Signing Bonus: A signing bonus is paid the moment the player signs the contract. It is paid directly out of the owner’s pocket. Many call this “cash”. When it comes to accounting, the bonus is prorated across the life of the contract and as the player passes through years of the contract, the total dead money generated by the signing bonus decreases. This is always guaranteed money.

Roster Bonus: A roster bonus is a time-based lump sum payment. For instance, a team will put into a player’s contract that he is due a 3 million dollar roster bonus by the third day of the new league calendar. If that bonus is not guaranteed and the player is cut, he does not see the money and there is no dead money. If he is on the roster, he is paid the money and it is added to his current year’s cap hit. Similar to roster bonuses are workout bonuses. They work the same, they are simply paid during organized team activities if the player attends.

Incentives: These are statistically based accomplishments that when hit, generate a payment for the player. This could be, for example, a defensive end reaching 10 sacks. Incentives are negotiated and are not on every contract. Furthermore, incentives are broken into two groups, Likely to be Earned (LTBE), and Not Likely to be Earned (NLTBE). LTBE incentives are accounted for immediately for that season’s cap and if it is not earned, the team is given a cap credit for the next season. The NLTBE incentives, teams do not account for it and if the player achieves the incentive, the team receives a cap debit and pays it retroactively.

Rookie Pool: This is the amount the Raiders must pay the rookies for the upcoming draft based on their current draft position and amount of picks. Rookie contracts are slotted and mostly predetermined. The amount is not allocated at any time and teams are not required to set it aside. Rookies are paid out of the cap and the only rule for teams is that they must maintain cap integrity when each rookie signs his contract. Each team will have to eventually spend this money on rookies, but a team can do other tricks later to generate more cap space when they go to sign the rookies

What Can The Raiders Do?

First and foremost, the most important piece of business for the Raiders is to extend Khalil Mack. By applying his fifth-year option, the Raiders are due to pay him $13,846,00 in 2018 and every penny is guaranteed. There is an assumption by some in Raider Nation that Mack’s cap hit will actually increase with his extension. This is a false assumption. It did happen with Carr, but that was due to the fact he was earning second-round draft pick money. For Mack, the Raiders can steal inspiration from the Von Miller and Ndamukong Suh contracts. It would look something like the following:

6 years, 120 million dollars, 60 million in guaranteed money
30 million dollar signing bonus, earns 32 million in Year One, and 40 million after two years. Guarantees are signing bonus, years one, two, and three base salaries.

Because the signing bonus is paid upfront at signing but is accounted for as a yearly proration across the life of the contract, the Raiders can massively shrink their 2018 cap hit. This is simply an accounting trick and it is how teams with rich owners manipulate the cap. Teams such as the Dolphins who are well over the cap, but have owners with a ton of cash, can take a large base salary and convert it to a signing bonus.

This allows the owner to pay for it across the remaining years and opens up cap space. Al Davis used this mechanism in his later years and it got the Raiders in trouble. McKenzie has done such a good job mitigating risk in his other contracts that it would be an acceptable risk for the Raiders. The question is, does Mark Davis have the cash? I hope so because if he does not, he will not be making any signings of note this offseason.

New cap space: $22,665,780

Make the following cuts:
Sean Smith: 8.5 million
Marshall Newhouse: 2.25 million
Seth Roberts: 2.45 million, 2 million dead

It should be noted that my model is a “worst case scenario”. There are signs including a tweet from @NFLDraftBites that the market will be soft for cornerbacks in free agency. If so, the Raiders can use a smaller signing bonus or simply lessen the back end cap hits.

New cap space: $24,865,780

Sign Muhammad Wilkerson
3 years 15 million, 6 million guaranteed, 6 million signing bonus. With incentives up to 27 million. Half of incentives likely to be earned and half unlikely to be earned
Yr 1: 1 million base, 2 million prorated, 2 million bonuses. Cap hit: 5 million
Yr 2: 3 million base, 2 million prorated, 2 million bonuses. Cap hit: 7 million
Yr 3: 5 million base, 2 million prorated, 2 million bonuses. Cap hit: 9 million

(Since the writing of this article, the Raiders resigned Justin Ellis to a 3 year, 15 million dollar contract, with 6 million guaranteed. He fills this need on the depth chart.)

Cut Jared Cook: 5.675 million in new cap space. 2.675 million in savings for 2018.

New cap space: $18,540,780

From here the Raiders can do a variety of things including signing a linebacker. There are three premium players in Preston Brown, Avery Williamson, and Anthony Hitchens, They could also add a cut player such as Jerrell Freeman. Players who have been cut do not count against the compensatory pick formula and because of that, I believe the Raiders will have an eye towards those type of players.

The Rory Approach

This will be a relatively short section. To me, copying what I have so far laid out is a great start. I would add Jerrell Freeman, Parnell McPhee, and Quinton Demps for depth at the linebacker, edge, and strong safety positions respectively. All three players should create a 2018 cap hit of approximately 8 million dollars. From here, the Raiders would be able to cover their rookie pool, but they would not have any structural cap for the season and have nothing to prepare for potential incentives.

It is at this point that restructuring contracts would be in order. McKenzie could generate cap space by unilaterally converting the base salary of certain players into signing bonuses. These bonuses would be paid immediately and prorated over the remaining contract years. The optimal players for this treatment would be Kelechi Osemele, Rodney Hudson, and Derek Carr. Between these three contracts, the Raiders could generate upwards of 25 million dollars in new cap space.

I will fully admit that vanity is driving me to believe that I at least have a good feel for what the Raiders will do in free agency. Wilkerson met Packers brass on March 8th but he already has other stops planned and he grew up a Raiders fan. If you follow me on Twitter at all you will know that I tend to throw out a lot of ideas. These thought experiments are fun, but they also help bounce ideas off of other people.

My confidence has grown and I do think Reggie and Jon get both Wilkerson and Trumaine Johnson. From there the rest of the roster is a tough call. It also would not surprise me if they sign Allen Robinson or Sammy Watkins and replace Michael Crabtree. In the end, I believe the Raiders will make five signings: Wilkerson, Johnson, a third WR, Levine Toilolo and cut or trade Cook, and add Edge depth.

*Please note these numbers do not reflect the recent re-signing of Justin Ellis.

Catch me on the Raider Lounge Podcast with @THEUKRAIDER and @Jubair22 this weekend and do not forget to follow me @holistic_pickle on Twitter.

For a non-football podcast, tune into Speak Up!, a new current events podcast where @PhilRobinsonNFL and I recap the week in news stories and give our opinions. Follow the show @PlzSpeakUp for updates.